Expats working in the oil and gas sector are enduring tough times – markets are volatile, and oil is striking seven-year lows
Much has been written by learned economists, traders and strategists about the direction of oil prices, says Patrick Breen of expat financial advisers AES International. The heat and noise around the latest OPEC meeting left cartel members themselves no better informed than the hundreds of thousands of people working in oil and gas, and their millions of dependants, about the future of the industry and the oil prices that drive so many livelihoods. As the weeks roll by, expats in the sector are battening down the hatches in anticipation of job cuts, reduced allowances and a future that looks less and less rosy.
While it seems a long time since the agonised discussions about peak oil and $200 oil, a few lessons are worth remembering. Notably, the industry has been here before. Like any cyclical sector, oil and gas, and particularly the upstream businesses, are vulnerable to dramatic market movements, forcing corporate leaders to respond to short-term financial cues in determining which long-term projects to support.
The implications for employees and their families can be huge. Financial markets tend to look many months or years into the future in an attempt to anticipate likely outcomes. As a result, it is normal for markets to overshoot – so the pressures on employees’ savings plans can be dramatic. But history shows that almost all markets return to long-term averages and those who are patient can benefit enormously.
Patrick Breen says he has learned a few lessons over the years about coping with this volatile situation:
- It’s important to have a savings and investment plan which means that you and your family are able to plan for the long term. Getting in place a plan which is resilient enough to cope with the volatility we are enduring is part of the answer.
- Make the most of the expat years. For most of us, expat postings are part of the appeal of working life. But you’ve got to make sure that you take advantage of any tax breaks, or allowances, that come with the deal. One simple rule we use is that you should aim to save at least the amount that you would have paid in tax if they weren’t in a tax-advantaged posting.
- Don’t panic, It will get better. Markets undershoot – so, if you can tough it out, things will likely improve. We’re not brave, or dumb enough, to predict what’s going to happen to WTI or Brent over any timeframe, but we know that Saudi production could ease tomorrow; that Iran’s production is at least partly discounted; and that North American tight oil producers may be more resilient than first thought.
- What’s the worst that can happen? For many of us, it is the fear of unemployment and keeping the family afloat. But history shows that all cyclical industries cut too deep when times are bad, and rush to hire when prices recover.